PSE&G Granted $100 Million Rate Hike, Socked with $122 Million in Refunds

Public Service Electric & Gas is on the verge of resolving some of its most pressing regulatory headaches as early as next week.

The state's largest electric and gas utility, state regulatory officials and others involved in a controversial rate case have reached a tentative settlement awarding the Newark utility a $100 million rate hike in customers’ electric and gas bills.

The proposed settlement, reached with an administrative law court judge and the state Division of Rate Counsel, is roughly half what PSE&G had sought in its rate case. Under its terms a typical residential customer would pay about $12 a year more for electricity. Gas bills would climb by about $14 annually.

In a separate settlement involving disputed overcharges by the utility in special surcharges stemming from the deregulation of the industry, PSE&G has agreed to refund $122 million to customers over the next two years, effectively offsetting the increase in gas and electric rates for that period.

The settlements are expected to be taken up by the New Jersey Board of Public Utilities as early as its next meeting on Monday. The BPU can approve, modify or reject the stipulations. If approved, the new rates would take effect upon the board’s written order.

At the same meeting, however, the agency is also scheduled to act on a nearly three-year-old petition, which aims to prevent the utility from collecting so-called stranded costs arising out of energy deregulation. At issue is a surcharge allowing the utility to collect from ratepayers funds to offset diminished value of power plants owned by the company as a result of the breakup of its electric monopoly. Critics argue the plants, instead of losing value, have become cash cows for the company, helping it to record record profits last year.

Judicial Recommendation

As part of the settlement, the judge also recommended the state launch a separate proceeding to investigate discounted rates a PSE&G affiliate, PSEG Power, and other companies receive on gas they purchase from the utility and special deals they have received from regulators where they avoid paying surcharges most other customers pay.

Last month, NJ Spotlight reported that PSEG Power, one of the nation’s biggest independent power suppliers, has avoided paying the societal benefits charge (SBC), a fee on utility bills that last year raised $740 million from ratepayers (see PSE&G's Largest Gas Customer Dodges Major Utility Fee). The money helps fund clean energy programs and low-income energy assistance programs. It also goes to cleaning up contaminated coal gasification plants owned by PSEG Power.

The report prompted calls for investigations into the deals by Sen. Robert Smith (D-Middlesex) and a coalition of business, public interest and environmental groups.

Ev Liebman, director of program advocacy for New Jersey Citizen Action, was unhappy the utility is being granted a rate increase. "We’ve called for a freeze on PSE&G rates until this whole SBC issue is resolved," Liebman said. “We think there is evidence to suggest that Public Service should be returning money to ratepayers."

Hal Bozarth, executive director of the Chemistry Council of New Jersey agreed. "In these economic times, with industrial rates in New Jersey 60 percent above the national average, we cannot afford the bloated salaries and bonuses these monopolies are receiving from ratepayers."

Good for Ratepayers

But Division of Rate Counsel Director Stefanie Brand called the settlement "a good result for ratepayers. They were looking for roughly $250 million so we managed to cut the size of it pretty much,’’ she said.

In addition, the settlement of the five-year-old dispute involving PSE&G’s over-collection of stranded costs from the breakup of its electric monopoly will result in its customers not feeling the brunt of the rate increase in electric and gas bills for two years, Brand said.

PSE&G filed for a $133 million increase in its electric rates and a $96 million boost in gas rates last May, but increased the request to $147 million and $105 million last September. The case was assigned to an administrative law court judge, who held hearings on the issue late in February and March. Numerous settlement conferences were held in an effort to secure a stipulated settlement, which was signed on May 28.

As a result of the settlement, the average bill for a residential customer for electricity will increase from $1,385.72 a year to $1,398.12, a boost of 0.89 percent, and the average bill for a residential gas customer will rise to $1,442.92 from $1,428.60, a 1 percent increase.

During the hearings in the case, it was revealed that PSEG Power had never paid the SBC surcharge, nor had the company paid other fees most other ratepayers must pay. These include a fee to help the state reduce greenhouse gas emissions and a surcharge to pay for expedited improvements to its infrastructure under a Corzine initiative to create jobs.

The failure of PSEG Power and an undetermined number of other companies to pay the surcharges will be the subject of a new BPU proceeding, according to the settlement. Brand said she welcomed such a proceeding.

"It became clear to me during the hearings, that there are no uniform standards being applied to who gets these contracts. I don’t even know how many of them there are out there," she said.